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Scrapping of MDR is a zero-sum game. Let the market, not heavy-handed regulations, set the rules

Policy initiatives should be carefully crafted to further, not limit, the forward march by UPI and RuPay. The zero-MDR policy could check the rise of digital payments, as consumers and merchants might prefer to transact in cash.
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29 Jan 2020 6 Mins Read 1 comments
RuPay logo displayed on the volleyball net during RuPay Pro Volleyball League at RSC in Kochi on February 13, 2019. BCCL
RuPay logo displayed on the volleyball net during RuPay Pro Volleyball League at RSC in Kochi on February 13, 2019.
As the year 2019 was drawing to a close, finance minister Nirmala Sitharaman announced that no MDR charges would be applicable on transactions through RuPay and UPI (Unified Payments Interface) platforms beginning January 1, 2020. The stated objective of this move is to create policy incentives for a surging digital-payments industry. But the unintended consequences of a zero-MDR regime
and competition to supply an upper bound for potentially high MDR fees and let markets work. The proverbial invisible hand of the market, acting through competitive pressures, will yield far more effective results than heavy-handed price regulation in the payments-services market. (Mandar Kagade and Rohan Mishra are policy consultants with a focus on fintech. The views are personal.)
As the year 2019 was drawing to a close, finance minister Nirmala Sitharaman announced that no MDR charges would be applicable on transactions through RuPay and UPI (Unified Payments Interface) platforms beginning January 1, 2020. The stated objective of this move is to create policy incentives for a surging digital-payments industry. But the unintended consequences of a zero-MDR regime and competition to supply an upper bound for potentially high MDR fees and let markets work. The proverbial invisible hand of the market, acting through competitive pressures, will yield far more effective results than heavy-handed price regulation in the payments-services market. (Mandar Kagade and Rohan Mishra are policy consultants with a focus on fintech. The views are personal.)

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